Why private sector growth means jobs, jobs, jobs for Scots

Scotland’s private sector enjoyed its ninth consecutive month of growth during September with the fastest rate of job creation since May 2023, a key survey today suggests.

The latest Royal Bank of Scotland Regional Growth Tracker shows that the labour market remained a strong point for the Scottish private sector economy, outstripping the UK-wide average. However, firms continued to face sharply rising cost burdens in September.

Higher labour and material costs were said to have driven up prices, although the rate of input price inflation eased for the second consecutive month, reaching its lowest level since February 2021.

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The tracker’s headline business activity index eased to 51.2 last month, from 52.7 in August, owing to cooling growth in the services sector. A reading above 50 denotes expansion and below that level contraction, with 50 indicating no change.

Scotland’s private sector enjoyed its ninth consecutive month of growth during September with the fastest rate of job creation since May 2023, a key survey today suggestsScotland’s private sector enjoyed its ninth consecutive month of growth during September with the fastest rate of job creation since May 2023, a key survey today suggests
Scotland’s private sector enjoyed its ninth consecutive month of growth during September with the fastest rate of job creation since May 2023, a key survey today suggests | RBS / Natwest / Canva

Judith Cruickshank, chair of the Scotland board at Royal Bank of Scotland (RBS), said Scotland had ended the third quarter on a “positive note”.

She added: “Sustained growth in new business inflows enabled firms to increase their activity levels, although the pace of growth slowed. Notably, hiring activity surged, with job creation reaching its highest level since May 2023. Expansions in new business, activity and employment were driven by service firms, while manufacturers experienced broadly stable output and jobs but a sharp fall in new orders.

“The steeper decline in factory orders indicates more challenges for the Scottish manufacturing sector in the coming months. The uncertain political and economic landscape will also act as headwinds to growth, leading the Scottish private sector to increasingly depend on its service firms to drive the economy forward in the coming year.”

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Scottish firms continued to reduce their backlogs last month. The downturn was again focused at manufacturers, where decreasing workloads and improved efficiency enabled companies to address outstanding tasks. That said, the overall rate of depletion eased to the weakest in the current four-month sequence of decline. Compared to Scotland, the UK as a whole signalled a stronger fall in backlogs.

What does this all mean for the future?

Despite easing to a three-month low, the 12-month outlook for activity was positive in September and historically strong, RBS noted.

The tracker coincided with the release of the latest ICAEW Business Confidence Monitor. According to the accountancy body, business confidence in Scotland has slightly declined, but remains high and broadly in line with the UK average.

Scottish businesses reported that domestic sales grew in the third quarter for the first time in 18 months, climbing above their historical average but below the rate seen in the UK as a whole. Sentiment tracked by the monitor put confidence at 14.2 on the index, down from 15.4 in the previous quarter but well above its historical average.

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David Bond, ICAEW director, Scotland, said: “As speculation in Westminster continues ahead of what is likely to be a difficult Budget, we are calling on the Chancellor to provide the certainty and stability that companies need. Reforms to VAT, alongside public and private investment, could help to achieve this.”

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